American Bancorp N J (MM) (NASDAQ:ABNJ)
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American Bancorp of New Jersey, Inc. (NASDAQ: ABNJ) ("American")
announced today a loss of $13,000 for the quarter ended March 31, 2008.
By comparison, net income for the quarter ended March 31, 2007 was
$150,000. Both basic and diluted earnings per share for the quarter
ended March 31, 2008 were $0.00. By comparison, for the quarter ended
March 31, 2007, both basic and diluted earnings per share were $0.01.
The Company’s earnings for the six months
ended March 31, 2008 were $80,000 in comparison to $479,000 for the six
months ended March 31, 2007. Basic and diluted earnings per share for
the six months ended March 31, 2008 were $0.01 and $0.01, respectively.
By comparison, for the six months ended March 31, 2007, basic and
diluted earnings per share were $0.04 and $0.04, respectively.
For the six months ended March 31, 2008, loans receivable, net increased
$21.8 million or 5.0% to $459.7 million from $437.9 million at September
30, 2007. The growth was comprised of net increases in commercial loans,
including multi-family, commercial real estate, construction and
business loans, totaling $22.2 million. The increase in loans
receivable, net also included net increases in home equity loans and
home equity lines of credit totaling $469,000 and net increases in
consumer loans of $198,000. Offsetting the growth in these categories
was a $803,000 decrease in the balance of 1-4 family first mortgages and
a net increase to the allowance for loan losses totaling $275,000.
For that same period, the balance of the Company’s
investment securities increased by $36.7 million. This net growth in
securities was largely attributable to a wholesale growth transaction in
March 2008 through which the Company purchased approximately $50.0
million of mortgage-related investment securities funded by an
equivalent amount of borrowings from the FHLB and through reverse
repurchase agreements. The net interest income resulting from this
transaction is intended to augment the Company’s
earnings as it continues to incur the near term costs associated with
executing its business plan. Through this transaction, the Company took
advantage of the opportunity presented by recent turmoil in the mortgage
securities markets to acquire agency, AAA-rated mortgage-related
securities at historically wide interest rate spreads in relation to the
cost of wholesale funding sources. The growth in securities associated
with this transaction was partially offset by the continued reinvestment
of a significant portion of the funds received from maturing debentures
and other mortgage-related security repayments into the loan portfolio.
The Company’s balance of cash and cash
equivalents decreased by $9.2 million which also provided a portion of
the funding for the Company’s reported net
loan growth and continued share repurchases during the current six month
period.
The balance of deposits increased $8.4 million for the six months ended
March 31, 2008. This net growth reflected increases in certificates of
deposit and noninterest bearing checking accounts of $23.1 million and
$673,000, respectively. This growth was offset by reductions in interest
bearing checking and savings accounts of $13.0 million and $2.3 million,
respectively. For the same period, borrowings grew $49.0 million
reflecting the additions to FHLB advances and reverse repurchase
agreements associated with the $50.0 million wholesale growth
transaction noted above offset by the repayment of a maturing $1.0
million FHLB term advance. Additionally, the Company reported an
increase of $8.4 million in treasury stock attributable to the Company’s
share repurchase programs.
The Company’s yield on earning assets
decreased one basis point to 5.63% for the quarter ended March 31, 2008
from 5.64% for the quarter ended March 31, 2007. This decrease of one
basis point reflected the impact of overall reductions in market
interest rates on the yields of repricing assets which has been
substantially offset by the overall improved yields on earning assets
resulting from the Company’s growth in higher
yielding commercial loans.
The decrease in the yield on earning assets between the comparative
quarters was outpaced by a reduction in the Company’s
interest costs for the same periods. The Company’s
cost of interest-bearing liabilities decreased 26 basis points to 3.93%
for the quarter ended March 31, 2008 from 4.19% for the quarter ended
March 31, 2007. This decrease in interest cost was primarily
attributable to two related factors. First, the Company continued to
reduce the interest rates paid on deposits generated through the three
full service branches opened during fiscal 2007 on which promotional
interest rates had originally been paid. Second, reductions in market
interest rates enabled the Company to reduce rates paid on many
interest-bearing deposit types across all branches. In total, the Company’s
net interest spread widened 26 basis points to 1.70% from 1.44% for
those same comparative periods.
The factors noted in the quarterly discussion above have also effected
the Company’s comparative net interest spread
for the six months ended March 31, 2008 and 2007. However, the effects
of the significant reductions in market interest rates during the second
quarter ended March 31, 2008, as discussed above, are somewhat muted by
the first quarter’s results included in the
six month calculation. As such, for the comparative six month periods,
the Company’s yield on earning assets
increased 17 basis points to 5.73% from 5.56% in comparison to the one
basis point reduction in that measure discussed above. Moreover, for
those same comparative periods, the Company’s
cost of interest-bearing liabilities increased six basis points to 4.13%
from 4.07% compared with the 26 basis point reduction discussed above.
The directional contrast between the three and six month comparative
periods for both interest yields and costs indicates an inflection
point, or reversal, for both measures during the quarter ended March 31,
2008. In total, the Company’s net interest
spread widened 11 basis points to 1.60% for the six months ended March
31, 2008 from 1.49% for the same period in 2007.
The factors resulting in the widening of the Company’s
net interest spread also positively impacted the Company’s
net interest margin for both the three and six month periods ended March
31, 2008. However, the impact of the Company’s
share repurchase plans on net interest margin for each period more than
offset the benefits of the widening net interest spread. For the
comparative three and six month periods ended March 31, 2008 and 2007,
the average balance of treasury stock increased $18.0 million and $20.2
million, respectively, reflecting the Company’s
share repurchase activity. The foregone interest income on the earning
assets used to fund those share repurchases contributed significantly to
the reduction in the Company’s net interest
margin reported for the comparative three and six month periods. For the
three months ended March 31, 2008, the Company reported a three basis
point reduction in net interest margin to 2.38% from 2.41% for the same
period in 2007. Similarly, for the six months ended March 31, 2008, the
Company reported a 16 basis point reduction in net interest margin to
2.34% from 2.50% for the same period in 2007.
Notwithstanding the margin compression noted above, the Company reported
an increase in net interest income of $149,000 or 4.9% to $3.2 million
for the quarter ended March 31, 2008 from $3.1 million for the quarter
ended March 31, 2007. This increase was complemented by a comparatively
lower provision to the allowance for loan losses. For those same
comparative periods, the Company’s loan loss
provision decreased $22,000 to $171,000 from $193,000. The expense for
the quarter ended March 31, 2008 reflected a provision of $34,000
attributable to one impaired construction loan, that portion of which
was deemed uncollectible by management during its asset quality review
conducted at March 31, 2008 and therefore charged off. The remaining
balance of the impaired loan at March 31, 2008, after the charge off,
was approximately $146,000. Excluding this adjustment, the provision for
loan losses for both comparative periods resulted from the application
of historical and environmental loss factors against the net growth in
loans in accordance with the Bank’s loan loss
methodology.
For the six months ended March 31, 2008, the Company reported an
increase in net interest income of $81,000 or 1.30% to $6.3 million from
$6.2 million for the six months ended March 31, 2007. This increase was
partially offset by a comparatively greater provision for loan losses.
For those same comparative periods, the Company’s
loan loss provision increased $66,000 to $309,000 from $243,000. As
noted above, the expense in the current six month period included a
$34,000 provision against a specific impaired loan. By contrast, the
expense in the earlier comparative period reflected a reversal of an
$86,000 impairment reserve that was no longer required. Excluding these
adjustments, the provision for loan losses for both comparative periods
resulted from the application of historical and environmental loss
factors against the net growth in loans in accordance with the Bank’s
loan loss methodology.
For the three month period ended March 31, 2008, noninterest income
increased $83,000 to $438,000 from $355,000 for the quarter ended March
31, 2007. The growth in noninterest income was partly attributable to
increases in deposit service fees and charges. A portion of the increase
was attributable to deposit service fees and charges at the Bank’s
de novo branches opened during fiscal 2007. However, the reported
increase was primarily due to growth in deposit-related fees and charges
within the Bank’s other branches.
Additionally, the Company reported increases in income from the cash
surrender value of life insurance attributable to a combination of
higher average balances and improved yields on those assets. The Company
also reported an increase in other noninterest income attributable
primarily to growth in loan-related fees and charges including, but not
limited to, increases in prepayment penalties and late charges.
For the six months ended March 31, 2008, noninterest income increased
$190,000 to $833,000 from $643,000 for the same period in 2007. The
growth in noninterest income for the comparative six month periods was
largely attributable to the same factors as those impacting the
comparative three month periods discussed above.
For the three months ended March 31, 2008, noninterest expense increased
$546,000 to $3.6 million from $3.0 million for the three months ended
March 31, 2007. This growth in noninterest expense was primarily
attributable to increases in salaries and employee benefits, occupancy
and equipment, data processing and legal expenses.
Salaries and employee benefits increased $287,000 for the three months
ended March 31, 2008 from the same period in 2007. The increase in
compensation expense was largely the result of the previously announced
death of a director emeritus of the Company, during the quarter ended
March 31, 2008. Under the terms of the Company’s
restricted stock and stock option plans, the vesting of the remaining
unearned benefits accruing to the former director through these plans
was automatically accelerated. As such, the Company incurred an
acceleration of the remaining pre-tax expenses associated with these
benefits totaling approximately $254,000 during the quarter ended March
31, 2008.
The remaining increase in compensation expense was largely attributable
to the increase in staffing costs associated with the two branches
opened in the latter half of fiscal 2007 plus overall increases in the
costs of employee health benefits. However, such increases have been
substantially offset by cost reductions associated with previously
enacted workforce reduction efforts which reduced the Company’s
number of full time equivalent employees by over eight percent during
fiscal 2008. Additionally, director compensation costs have decreased
compared with the earlier three month period due largely to the absence
in the current period of the changes in retirement plan benefit accrual
assumptions that had increased the related expenses during the earlier
comparative period.
Like compensation expense above, the reported increase of $208,000 in
occupancy and equipment expense is also attributable, in part, to the
costs of the two additional branches opened in the latter half of fiscal
2007. However, the comparative increase also reflects the land lease
costs associated with the relocation of the Bank’s
Bloomfield branch which opened in April, 2008. Additionally, the
increase includes the cost associated with outsourcing a significant
portion of the Company’s information
technology infrastructure support services that had been provided by
in-house resources during the earlier comparative period.
The reported increase of $21,000 in data processing charges was also
partly attributable to the associated costs of the two additional
branches opened in the latter half of fiscal 2007 including both core
processing and item processing expenses. However, the increase also
included “one time”
expenses associated with converting the Bank’s
official check processing to an in-house system during the quarter and
implementing additional commercial deposit services on its core
processing system.
Finally, the reported increase in legal expense was attributable to
several matters including, but not limited to, services associated with
expanded SEC disclosure requirements regarding the Company’s
annual meeting proxy material and forthcoming revisions to benefit plan
agreements as required by the Internal Revenue Service.
For the six months ended March 31, 2008, noninterest expense increased
$931,000 to $6.8 million from $5.9 million for the same period in 2007.
The growth in noninterest expense for the comparative six month periods
was generally attributable to the same factors as those impacting the
comparative three month periods discussed above. Additionally, the
Company reported a reduction in advertising and marketing expense for
the more recent six month period reflecting the absence of the higher
expenses recorded in the earlier comparative period associated with the
Verona branch grand opening in December 2006.
The following tables present selected balance sheet data as of March 31,
2008 and September 30, 2007 and selected operating data for the three
months and six months ended March 31, 2008 and March 31, 2007.
FINANCIAL HIGHLIGHTS
(unaudited)
At March 31,
At September 30,
2008
2007
Balance
% TotalAssets
Balance
% TotalAssets
SELECTED FINANCIAL DATA
(in thousands):
Assets
Cash and cash equivalents
$
28,238
4.52
%
$
37,421
6.52
%
Securities available-for-sale
94,312
15.10
58,093
10.13
Securities held-to-maturity
7,200
1.15
6,730
1.17
Loans held for sale
-
-
1,243
0.22
Loans receivable, net
459,659
73.62
437,883
76.32
Premises and equipment
12,093
1.94
10,856
1.89
Federal Home Loan Bank stock
3,182
0.51
2,553
0.45
Cash surrender value of life insurance
13,480
2.16
13,214
2.30
Accrued interest receivable
2,473
0.40
2,212
0.39
Other assets
3,769
0.60
3,533
0.61
Total assets
$
624,406
100.00
%
$
573,738
100.00
%
Liabilities and equity
Deposits
$
437,030
69.99
%
$
428,600
74.70
%
Advances for taxes and insurance
2,812
0.45
2,702
0.47
Borrowings
86,580
13.87
37,612
6.56
Other liabilities
4,571
0.73
4,231
0.74
Equity
93,413
14.96
100,593
17.53
Total liabilities and equity
$
624,406
100.00
%
$
573,738
100.00
%
Loan Data
Balance
% TotalLoans
Balance
% TotalLoans
1-4 family mortgage loans
$
262,645
57.13
%
$
263,448
60.16
%
Home equity loans
14,399
3.13
14,625
3.34
Home equity lines of credit
20,524
4.47
19,829
4.53
Multifamily mortgage loans
31,767
6.91
30,552
6.98
Nonresidential mortgage loans
79,997
17.40
68,431
15.63
Land and property acquisition loans
5,871
1.28
3,340
0.76
Construction loans
38,737
8.43
32,542
7.43
Business loans
7,709
1.68
7,029
1.61
Consumer loans
853
0.19
655
0.15
Allowance for loans losses
(2,843
)
(0.62
)
(2,568
)
(0.59
)
Loans receivable, net
$
459,659
100.00
%
$
437,883
100.00
%
Deposit Data
Balance
% TotalDeposits
Balance
% TotalDeposits
Noninterest-bearing deposits
31,167
7.13
%
30,494
7.11
%
Interest-bearing checking
98,817
22.61
111,795
26.08
Savings
90,448
20.70
92,778
21.65
Certificates of deposit
216,598
49.56
193,533
45.16
Deposits
$
437,030
100.00
%
$
428,600
100.00
%
FINANCIAL HIGHLIGHTS (continued)
(unaudited)
At March 31,
At September 30,
2008
2007
Capital Ratios
Equity to total assets (%)
14.96
17.53
Outstanding shares (#)
11,142,501
11,946,190
Asset Quality Ratios:
Non-performing loans to total loans (%)
0.21
0.28
Non-performing assets to total assets (%)
0.16
0.22
Allowance for loan losses to non-performing
loans (%)
289.53
205.56
Allowance for loan losses to total loans (%)
0.61
0.58
For the six months ended
March 31,
For the three months ended
March 31,
2008
2007
2008
2007
SELECTED OPERATING DATA
(in thousands):
Total interest income
$
15,424
$
13,867
$
7,590
$
7,159
Total interest expense
9,117
7,641
4,384
4,102
Net interest income
6,307
6,226
3,206
3,057
Provision for loan losses
309
243
171
193
Net interest income after provision for loan
losses
5,998
5,983
3,035
2,864
Noninterest income
833
643
438
355
Noninterest expense
6,844
5,913
3,568
3,022
Income (loss) before income taxes
(13
)
713
(95
)
197
Provision (benefit) for income taxes
(93
)
234
(82
)
47
Net income (loss)
$
80
$
479
$
(13
)
$
150
Performance Ratios:
Return on average assets
0.03
%
0.18
%
(0.01
)%
0.11
%
Return on average equity
0.17
0.83
(0.05
)
0.54
Net interest rate spread
1.60
1.49
1.70
1.44
Net interest margin
2.34
2.50
2.38
2.41
Noninterest income to average total assets
0.29
0.25
0.31
0.26
Noninterest expense to average total assets
2.39
2.26
2.49
2.25
Efficiency Ratio
95.85
86.08
97.93
88.58
PER SHARE DATA:
Earnings per share
Basic
0.01
0.04
0.00
0.01
Diluted
0.01
0.04
0.00
0.01
The foregoing material contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995
concerning our financial condition, results of operations and business.
We caution that such statements are subject to a number of
uncertainties and actual results could differ materially, and,
therefore, readers should not place undue reliance on any
forward-looking statements. We do not undertake, and specifically
disclaim, any obligation to publicly release the results of any
revisions that may be made to any forward-looking statements to reflect
the occurrence of anticipated or unanticipated events or circumstances
after the date of such statements.